SHLE:CC - Source Energy Services Completes Refinancing of Senior Credit Facility Amends Senior Secured Note Indenture and Makes the Payment of Cash Interest

(TheNewswire)

Calgary, Alberta – TheNewswire - (October1 7 , 2022) ( TSX:SHLE ) (OTC:SCEYF) – Source EnergyServices Ltd. (together with its affiliates, “Source” or the“Company”) is pleased to announce it has closed a new revolvingasset backed senior credit facility (the “ABL”) with a syndicatecomprised of FGI Worldwide LLC (“FGI”) and CIT Northbridge Credit,as advised by CIT Asset Management LLC (“CIT”), providing accessto funding of approximately CAD $75 million (USD $55 million), and hasmade the August 15, 2022 cash interest payment on its 10.5% seniorsecured first lien notes due March 15, 2025 (the “Senior Notes”).

This new ABL facility provides Source with a lower cost of borrowing,less restrictive covenants and an improved liquidity profile. Thiswill allow Source to capitalize on anticipated increasing activitylevels in 2023 (and beyond) and focus on generation of free cash flowand reduction of the outstanding principal amount of its Senior Notes.The Company has also entered into a supplemental indenture to theindenture that governs its Senior Notes (the “SupplementalIndenture”) which permits Source to execute the new ABL creditfacility.

The ABL facility includes financial covenants which are lessrestrictive than Source’s prior credit facility and align withSource’s longer-term goals. The covenants take into accountSource’s current operating environment, utilizing inputs whichreflect only current year operating results and beyond. Key financialcovenants of the facility include:

• a fixed charge coverage ratio of 1:15:1 tested monthly and prior to adistribution based on trailing 12-month inputs starting January 1,2022;

• maximum capital expenditures in a fiscal year equal to the lesser of$13.5 million or 35% of trailing 12-month EBITDA, commencing January1, 2022;

• a minimum level of the average of the prior three months trailingtwelve months of earnings before interest, tax, depreciation andamortization calculated at each fiscal calendar month equal to CAD$25.0 million for October 31, 2022 to December 31, 2022; and

• a minimum level of excess availability that begins at CAD $3.0 millionand rises to CAD $5.0 million by March 31, 2023.

The new ABL facility bears interest at the Secured Overnight FinancingRate (“SOFR”), plus applicable margin, and is secured by a firstlien charge on cash, the accounts receivable and inventory of theCompany and a second lien charge on all other assets of the business.The ABL facility matures on the earlier of October 1 4 , 2025 or six months prior to the maturity of theSenior Notes, with amounts available under the ABL subject to aborrowing base formula applied to accounts receivable and inventory.Additional terms of the Supplemental Indenture include a limit oncapital expenditures incurred beyond overburden removal, minedevelopment and maintenance activities, and limits on incurrences ofadditional debt and liens by Source.

With the payment of the August 15, 2022 cash interest payment for theSenior Notes and the execution of the Supplemental Indenture, allprior events of default under the indenture have been cured andwaived.

The Company’s advisors in connection with the transaction wereCanaccord Genuity and its legal advisors were Norton Rose FulbrightCanada LLP. FGI and CIT’s legal advisors were Blank Rome LLP andBlake Cassels & Graydon LLP. A committee of the holders of theSenior Notes was advised by Bennett Jones LLP.

ABOUT SOURCE ENERGY SERVICES

Source is a company that focuses on the integrated production anddistribution of high quality frac sand, as well as the distribution ofother bulk completion materials not produced by Source. Sourceprovides its customers with an end-to-end solution for frac sandsupported by its Wisconsin and Peace River mines and processingfacilities, its Western Canadian terminal network, its “last mile”logistics capabilities and Sahara, a proprietary wellsite mobile sandstorage and handling system.

Source’s full-service approach allows customers to rely on itslogistics platform to increase reliability of supply and to ensure thetimely delivery of frac sand and other bulk completion materials atthe wellsite.

ABOUT FGI

FGI (www.FGIWW.com) is a global leader in the commercial finance andservices industry, equipping small and medium enterprises with thetools they need to safely grow their business. FGI’s two principalbusiness units, FGI Finance and FGI Risk, provide clients withflexible and customized lending, as well as risk mitigation solutionsdesigned to support international and domestic growth. Headquarteredin New York City, FGI maintains a presence on six continents withclients in over sixty countries around the world.

ABOUT CIT

CIT is adivision of First Citizens Bank, the largest family-controlled bank inthe United States, continuing a unique legacy of strength, stabilityand long-term thinking that has spanned generations. Parent company,First Citizens BancShares, Inc. (NASDAQ: FCNCA) is a top 20 U.S.financial institution with more than $100 billion in assets. Thecompany's commercial banking segment brings a wide array ofbest-in-class lending, leasing and banking services to middle-marketcompanies and small businesses from coast to coast. First Citizensalso operates a nationwide direct bank and a network of more than 550branches in 22 states, many in high-growth markets. Industryspecialists bring a depth of expertise that helps businesses andindividuals meet their specific goals at every stage of theirfinancial journey. Discover more at cit.com/firstcitizens .

CIT Northbridge Credit is a trusted financial partner supporting middle-marketcompanies with a broad range of flexible asset-based debt solutions. Ajoint venture advised by CIT Asset Management, it provides revolvingand term loan commitments from $15 million to $150 million tocompanies across various industries and business cycles, and servesprimarily as sole lender, agent, club participant or co-lender.

FORWARD-LOOKING STATEMENTS

Certain statements contained in this press release constituteforward-looking statements relating to, without limitation,expectations, intentions, plans and beliefs, including information asto the future events, results of operations and Source’s futureperformance (both operational and financial) and business prospects.In certain cases, forward-looking statements can be identified by theuse of words such as “expects”, “estimates”,“anticipates”, “believes”, “continues”, “focus” orvariations of such words and phrases, or state that certain actions,events or results “may” or “will” be taken, occur or beachieved. Such forward-looking statements reflect Source’s beliefs,estimates and opinions regarding its future growth, results ofoperations, future performance (both operational and financial), andbusiness prospects and opportunities at the time such statements aremade, and Source undertakes no obligation to update forward-lookingstatements if these beliefs, estimates and opinions or circumstancesshould change unless required by applicable law. Forward-looking statements are necessarily based upon a numberof estimates and assumptions made by Source that are inherentlysubject to significant business, economic, competitive, political andsocial uncertainties and contingencies. Forward-looking statements arenot guarantees of future performance.

By their nature, forward-looking statements involve numerous currentassumptions, known and unknown risks, uncertainties and other factorswhich may cause the actual results, performance or achievements ofSource to differ materially from those anticipated by Source anddescribed in the forward-looking statements.

With respect to the forward-looking statements contained in this pressrelease assumptions have been made regarding, among other things:proppant market prices; future oil, natural gas and liquefied naturalgas prices; future global economic and financial conditions; futurecommodity prices, demand for oil and gas and the product mix of suchdemand; levels of activity in the oil and gas industry in the areas inwhich Source operates; the continued availability of timely and safetransportation for Source’s products, including without limitation,Source’s rail car fleet and the accessibility of additionaltransportation by rail and truck; the maintenance of Source’s keycustomers and the financial strength of its key customers; themaintenance of Source’s significant contracts or their replacementwith new contracts on substantially similar terms and that contractualcounterparties will comply with current contractual terms; operatingcosts; that the regulatory environment in which Source operates willbe maintained in the manner currently anticipated by Source; futureexchange and interest rates; geological and engineering estimates inrespect of Source’s resources; the recoverability of Source’sresources; the accuracy and veracity of information and projectionssourced from third parties respecting, among other things, futureindustry conditions and product demand; demand for horizontal drillingand hydraulic fracturing and the maintenance of current techniques andprocedures, particularly with respect to the use of proppants;Source’s ability to obtain qualified staff and equipment in a timelyand cost-efficient manner; the regulatory framework governingroyalties, taxes and environmental matters in the jurisdictions inwhich Source conducts its business and any other jurisdictions inwhich Source may conduct its business in the future; future capitalexpenditures to be made by Source; future sources of funding forSource’s capital program; Source’s future debt levels; the impactof competition on Source; and Source’s ability to obtain financingon acceptable terms.

A number of factors, risks and uncertainties could cause results todiffer materially from those anticipated and described hereinincluding, among others: the effects of competition and pricingpressures; risks inherent in key customer dependence; effects offluctuations in the price of proppants; risks related to indebtednessand liquidity, including Source’s leverage, restrictive covenants inSource’s debt instruments and Source’s capital requirements; risksrelated to interest rate fluctuations and foreign exchange ratefluctuations; changes in general economic, financial, market andbusiness conditions in the markets in which Source operates; changesin the technologies used to drill for and produce oil and natural gas;Source’s ability to obtain, maintain and renew required permits,licenses and approvals from regulatory authorities; the stringentrequirements of and potential changes to applicable legislation,regulations and standards; the ability of Source to comply withunexpected costs of government regulations; liabilities resulting fromSource’s operations; the results of litigation or regulatoryproceedings that may be brought against Source; the ability of Sourceto successfully bid on new contracts and the loss of significantcontracts; uninsured and underinsured losses; risks related to thetransportation of Source’s products, including potential rail lineinterruptions or a reduction in rail car availability; the geographicand customer concentration of Source; the impact of climate changerisk; the ability of Source to retain and attract qualified managementand staff in the markets in which Source operates; labor disputes andwork stoppages and risks related to employee health and safety;general risks associated with the oil and natural gas industry, lossof markets, consumer and business spending and borrowing trends;limited, unfavorable, or a lack of access to capital markets;uncertainties inherent in estimating quantities of mineral resources;sand processing problems; implementation of recently issued accountingstandards; the use and suitability of Source’s accounting estimatesand judgments; the impact of information systems and cyber securitybreaches; and risks and uncertainties related to COVID-19 or itsvariants, including changes in energy demand.

Although Source has attempted to identify important factors that couldcause actual actions, events or results to differ materially fromthose described in the forward-looking statements, there may be otherfactors that cause actions, events or results not to be asanticipated, estimated or intended. There can be no assurance thatforward-looking statements will materialize or prove to be accurate,as actual results and future events could differ materially from thoseanticipated in such statements. The forward-looking statementscontained in this press release are expressly qualified by thiscautionary statement. Readers should not place undue reliance onforward-looking statements. These statements speak only as of the dateof this press release. Except as may be required by law, Source expressly disclaims any intention orobligation to revise or update any forward-looking statements orinformation whether as a result of new information, future events orotherwise.

Any financial outlook and future-oriented financial informationcontained in this press release regarding prospective financialperformance, financial position or cash flows is based on assumptionsabout future events, including economic conditions and proposedcourses of action based on management’s assessment of the relevantinformation that is currently available. Projected operationalinformation contains forward-looking information and is based on anumber of material assumptions and factors, as are set out above.These projections may also be considered to contain future orientedfinancial information or a financial outlook. The actual results ofSource’s operations for any period will likely vary from the amountsset forth in these projections and such variations may be material.Actual results will vary from projected results. Readers are cautionedthat any such financial outlook and future-oriented financialinformation contained herein should not be used for purposes otherthan those for which it is disclosed herein. The forward-lookinginformation and statements contained in this document speak only as ofthe date hereof and have been approved by the Company’s managementas at the date hereof. The Company does not assume any obligation topublicly update or revise them to reflect new events or circumstances,except as may be required pursuant to applicable laws.

FOR FURTHER INFORMATION PLEASE CONTACT:

Scott Melbourn
Chief Executive Officer
(403) 262-1312
investorrelations@sourceenergyservices.com

Derren Newell
Chief Financial Officer
(403) 262-1312
investorrelations@sourceenergyservices.com

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